I am buying a property in my SMSF.
My SMSF has a corporate trustee and I am the director and sole member.
The SMSF is to contribute $100k toward a $380k purchase.
Most of the advice on how to proceed involves setting up a corporate trustee for a bare trust to act as security guardian of the purchased property.
Somehow under this "installment" structure the SMSF is deemed to have bought the property.
Lending from banks under this arrangement is borderline ursury.
There is a lot of drama and angst that the bank can only issue a limited recourse loan to a SMSF. However the banks still want the director of the security custodian (me) to provide additional guarantee on the loan, so really, they have their arses covered well.
I have been quoted a $1800 application fee, almost 10% interest and a 65-70% LVR (and there it is likely the valuation will be low, to further protect the banks position, to do the above purchase for the SMSF.
HOWEVER, If I buy the same property in a $2 company and discretionary trust structure - suddenly the angst about limited recourse evaporates.
The deal them becomes a $600 application, ~7% interest and an 80% LVR.
HUH?
Now - why cant I just do the deal in the $2 company and discretionary trust and then instigate a loan arrangement between the corporate trustee of the borrowing entity and the corporate trustee of the SMSF?
The SMSF does not have to borrow from the bank. It can borrow from anyone.
So - what am I missing or not understanding here?
Surely as SMSF Trustee I want the best deal for my fund - which is lower application fees, lower interest and higher LVR?
At the end of the line is lil old me anyway, so under either scenario, if it all goes to excrement, the Bank comes after me as the guarantor under both arrangements - so what the ????
I mean - really - where is the risk?? I am borrowing $280k, the property will be rented at about $450pw; there is my 9% employer contribution on about $80k and I can salary sacrifice say another $100 or even $200pw into the deal.
If I loose my job AND loose a tenant - well that can happen whether it is SMSF owned or not - and despite the terror of the non-recourse loan, the bank still gets to sell the property and also come after me as an individual.
I just dont get what all the fear and loathing of lending to a SMSF is all about
My SMSF has a corporate trustee and I am the director and sole member.
The SMSF is to contribute $100k toward a $380k purchase.
Most of the advice on how to proceed involves setting up a corporate trustee for a bare trust to act as security guardian of the purchased property.
Somehow under this "installment" structure the SMSF is deemed to have bought the property.
Lending from banks under this arrangement is borderline ursury.
There is a lot of drama and angst that the bank can only issue a limited recourse loan to a SMSF. However the banks still want the director of the security custodian (me) to provide additional guarantee on the loan, so really, they have their arses covered well.
I have been quoted a $1800 application fee, almost 10% interest and a 65-70% LVR (and there it is likely the valuation will be low, to further protect the banks position, to do the above purchase for the SMSF.
HOWEVER, If I buy the same property in a $2 company and discretionary trust structure - suddenly the angst about limited recourse evaporates.
The deal them becomes a $600 application, ~7% interest and an 80% LVR.
HUH?
Now - why cant I just do the deal in the $2 company and discretionary trust and then instigate a loan arrangement between the corporate trustee of the borrowing entity and the corporate trustee of the SMSF?
The SMSF does not have to borrow from the bank. It can borrow from anyone.
So - what am I missing or not understanding here?
Surely as SMSF Trustee I want the best deal for my fund - which is lower application fees, lower interest and higher LVR?
At the end of the line is lil old me anyway, so under either scenario, if it all goes to excrement, the Bank comes after me as the guarantor under both arrangements - so what the ????
I mean - really - where is the risk?? I am borrowing $280k, the property will be rented at about $450pw; there is my 9% employer contribution on about $80k and I can salary sacrifice say another $100 or even $200pw into the deal.
If I loose my job AND loose a tenant - well that can happen whether it is SMSF owned or not - and despite the terror of the non-recourse loan, the bank still gets to sell the property and also come after me as an individual.
I just dont get what all the fear and loathing of lending to a SMSF is all about